'Throwing money' at wrong buyers?

Re: 'First-time buyers aren't first in line' (Sept. 4)

Dear Editor:

In a perfect world, industry solutions would be created, or at least vetted, by industry experts and practitioners. I believe we can all safely assume that anything to the contrary is a complete waste of resources!

I still have not gotten my arms around the one where we so generously gave tax money to failed banks with no strings attached and a mere suggestion they help homeowners in hardship with temporary modifications. Come again?

"Oh, they're going to cure this financial crisis from the top on down." This one is giving lots of folks, including me, a major case of heartburn.

What about the monies given to states and cities?

The whole purpose of this money, or so we were told, was to help first-time buyers purchase a home and reduce the inventory of foreclosed homes. Well, the way one program in our state works: the buyer is loaned a percentage of the price of the home as a "silent second" (a second mortgage offered on preferential terms).

After owning the property for a predetermined time, that amount does not have to be repaid. OK, that sounds good so far. But here is where I have trouble understanding the rationale behind the guidelines:

First, the buyer must find a seller willing to sell the home for 5 percent below the appraised value vs. accepting a higher-than-list-price cash offer from an investor who can close in weeks as opposed to 60 days (plus or minus). (This is a perfect segue for another pet peeve of mine: Why aren't banks required to give first-time buyers a first shot at foreclosed homes? After 90 days on the market, first-time buyer exclusivity could be removed ...)

Let's say the home is valued at about $125,000. The buyer has to put 3.5 percent of his own money down ($4,375). If the Seller isn't jumping for joy at the idea of giving the buyer more money to help pay closing costs and other costs, the buyer has to have at least another 3.5 percent to cover those costs, ($4,375) along with two months of reserves ($450).

Now I don't know about you, but not even before the economy fell off a cliff did I come across many first-time buyers with $10,000 saved up to buy a house. So I'm going to go out on a limb and say that the successful first-time buyer programs I know about offered loan-worthy buyers a 30-year-fixed rate at or mostly below market. They typically included downpayment assistance with a required financial literacy class.

But I guess that model was just way too uncomplicated and mundane.

So the question begging to be asked: What percentage of first-time buyers are we targeting to help here? Are we throwing money at people who DON'T need the help? You be the judge.

Margie O'Campo de Castillo
Broker of Arizona Dream Realty
Phoenix, Ariz.

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